2. Gather Your Documents

Loans require documents — and not just a handful. You’ll need to gather all relevant information about your property and how it’s run. These can include:

• Current outstanding loan balance

• Rent rolls

• Profit & loss (P&L) statements from the last three years

• Schedule of real estate owned (SREO)

Of course, every lender’s requirements are going to be different. This can be a pain, but think of this step as stepping back to take a good, thorough look at your self-storage property — even if the lender doesn’t want every single document, it’s to your investment’s advantage if you have a 360-degree view of its strengths and weaknesses.

Note that you will not need an appraisal at this point — but it will be very helpful to have a good idea of your self-storage property’s market value. If you need guidance, consider using a broker opinion of value, or BOV. As loan maximums are typically limited by a loan-to-value ratio, understanding the value side can be immensely helpful.

3. Get Your Property Ready

When you’re taking a new loan, that means a lender will be closely looking at your property, assessing its value, and providing you with terms based on its strengths and weaknesses. This is a great time to start eliminating those weaknesses.

Do you have some self-storage units that are leaking? Fix them and improve your property value.

Thinking about adding some space for boat or RV storage? If it would add value, do it.

Of course, you won’t always have the money on hand to do everything you want, but the more you can address, the better the loan terms you’ll receive.

4. Start Talking to Lenders

Time to start talking to (and expanding) your network by reaching out to any lenders. You may be tempted to go with the same lender you’ve used in the past, but I’d strongly recommend shopping around your deal to others as well. After all, your property isn’t the same today as it was when you got your previous loan — why should you limit yourself to the same options?

Of course, it can be a bit exhausting to talk to another lender — let alone five or six. That usually means five or six different loan applications, five or six different sets of requirements, and so on. 

The Janover marketplace has revolutionized this — we shop your deal to hundreds of lenders, sending you multiple quotes to compare. Just take a minute and complete the form below.

5. Apply for Your Loan

After you’ve gotten the refinancing quote that best meets your needs, it’s time to apply.

Submit your loan application and provide the necessary financial information and documentation to the lender. The lender will then review the information and make a decision on your loan. They may require additional documentation, plus they will likely need to schedule a property appraisal at this point.

6. Close the Loan

Once everything is finalized and the loan is approved, sign the loan documents and close the loan. Your new mortgage payments will begin according to the terms of your refinancing agreement.

Types of Multifamily Refinance Loans

There are a number of different loan options for your self-storage refinance.

Bank Loans

Bank loans are among the most frequently used refinancing options for self-storage facilities. Provided by banks and credit unions, these financing instruments have little in common, with terms varying widely from lender to lender. That said, bank loan amounts typically start far lower than CMBS or life company loans, though costs may be higher. No two are the same, so it really pays to shop around.

Life Company Loans

Life company loans — that is, loans provided by life insurance companies — are an option for self-storage refinancing, but they admittedly are uncommon. Life company loans are typically limited to strong assets in large metros: Think Class A properties in primary markets.

Life company loans can be either fixed or floating rate, and are typically used for refinancing, acquisition, and rehabilitation. While terms vary, interest rates and leverage are generally lower than most other financing types.

SBA Loans

Loans backed by the Small Business Administration can be used for refinancing a self-storage property. There are two programs that offer financing, outlined below.

SBA 7(a) Loans

The SBA’s most popular loan program, the 7(a), can be used to refinance a self-storage facility — and even acquire or develop one. Interest rates are tied to the WSJ Prime, and loan terms can extend up to 25 years. In terms of drawbacks, the maximum loan amount for an SBA 7(a) loan is $5 million.

SBA 504 Loans

SBA’s 504 loan can also be used to refinance a self-storage property. These loans are less expensive than 7(a) loans, but they are slower to execute. Maximum loan amounts typically range up to $15 million, and the financing can only be used for the property itself — working capital for a self-storage business would fall outside the loan’s allowed uses.

CMBS Loans

Commercial mortgage-backed securities (CMBS) loans can be used for self-storage refinancing in a similar way to other commercial property types.These loans are typically offered by large financial institutions that pool multiple loans together and sell them to investors as securities.

One major advantage of CMBS loans is that they generally allow cash-out refinancing options, which allow borrowers to take out additional funds beyond the amount needed to pay off the existing loan. This cash-out option can be attractive to self-storage property owners who want to use the additional funds for property improvements or even other investments.

In terms of drawbacks, it's worth noting that CMBS loans can be more complex and are nearly all partially amortizing. Most CMBS financing options also include a defeasance prepayment penalty, which can be notoriously difficult to handle should you choose to pay a loan down early. 

Some Useful Tools

Current Rates

The table below is updated daily to provide up-to-date index rates.

Commercial Mortgage Calculator

Curious what your monthly mortgage payments could be? Input your figures into our calculator below.

Loan-to-Value Calculator

Use the calculator below to determine the loan-to-value ratio of your desired mortgage with your self-storage property’s value.

Conclusion

With rates continuing to climb, it makes sense to reassess your current financing. If it isn’t working for you, there are many options to consider. If you have a balloon payment coming due or a loan with a floating rate, it doesn’t have to be a headache to refinance.

Get a free quote by popping your details in the form below.

Related Questions

What are the best self-storage refinance options for 2023?

The best self-storage refinance options for 2023 include Bank Loans, CMBS, Life Company Loans, and Small Balance Loans. Leveraging relationships with regional banks and institutional lenders puts investors in a position to purchase or refinance an existing self storage property. Permanent financing packages are designed to meet immediate and long-term investment requirements. Options include Bank Loans, CMBS, Life Company Loans, and Small Balance Loans. Financing starts at just $1,000,000 with leverage up to 75% and amortizations as long as 30 years.

For more information, please visit Commercial Real Estate Loans.

What are the benefits of refinancing a self-storage facility?

Refinancing a self-storage facility can provide a number of benefits, including:

• Lower interest rates
• Longer loan terms
• The ability to take advantage of better loan terms
• The ability to re-invest the equity in the property elsewhere
• The ability to lock in a fixed-rate financing package to reduce future costs

For more information, please see Fix and Flip Cash Out Refinancing and 4 Reasons to Refinance Your Office Loan Today.

What are the risks associated with self-storage refinancing?

The risks associated with self-storage refinancing include the potential for a decrease in occupancy rates, a decrease in rental rates, and an increase in operating expenses. Additionally, there is the risk of defaulting on the loan if the borrower is unable to make payments. It is important to consider these risks when considering self-storage refinancing and to ensure that the borrower has the ability to make payments on the loan. Sources: Commercial Real Estate Loans, Bankrate.

What are the most important factors to consider when refinancing a self-storage facility?

When refinancing a self-storage facility, the most important factors to consider are the current market conditions, the competition within the market radius, and the saturation level of the market. It's important to look at the population and job growth, the number of homeowners or renters in the area, and the location of the facility in relation to university campuses, residential areas, or businesses. It's also important to consider the level of competition within the chosen market radius, as well as the saturation level of the area, which is measured by the gross square feet of storage space available per person. Currently, the average self-storage inventory per capita across the country is around 7 to 8 net square feet. A market with a per-capita inventory above the U.S. average is usually considered oversupplied, whereas anything below is undersupplied.

What are the current interest rates for self-storage refinancing?

Interest rates for self-storage refinancing vary depending on the type of loan product. Bank loans typically have interest rates ranging from 4.5% to 6.5%, CMBS loans typically have interest rates ranging from 4.5% to 5.5%, Life Company loans typically have interest rates ranging from 4.5% to 5.5%, and Small Balance Loans typically have interest rates ranging from 5.5% to 7.5%.

For more information, please visit Commercial Real Estate Loans.

What are the best strategies for negotiating a self-storage refinance?

The best strategies for negotiating a self-storage refinance include researching the current market conditions, understanding the terms of the loan, and negotiating with multiple lenders. It is important to understand the terms of the loan, such as the interest rate, loan amount, and repayment terms. Additionally, it is important to research the current market conditions to ensure that the loan terms are competitive. Finally, it is important to negotiate with multiple lenders to ensure that the best terms are obtained.

For more information on self-storage financing, please visit Commercial Real Estate Loans.

In this article:

1. Refinancing Your Self-Storage Property: 6 Steps
2. 1. Evaluate Your Goals
3. 2. Gather Your Documents
4. 3. Get Your Property Ready
5. 4. Start Talking to Lenders
6. 5. Apply for Your Loan
7. 6. Close the Loan
8. Types of Multifamily Refinance Loans
9. Bank Loans
10. Life Company Loans
11. SBA Loans
12. SBA 7(a) Loans
13. SBA 504 Loans
14. CMBS Loans
15. Some Useful Tools
16. Current Rates
17. Commercial Mortgage Calculator
18. Loan-to-Value Calculator
19. Conclusion
20. Related Questions
21. Get Financing